CFPB Unveils Model Disclosures for Student Loans

WASHINGTON — Piggybacking on its effort to revamp mortgage disclosures, the Consumer Financial Protection Bureau has released a shopping sheet to help students compare financial aid packages.

The one-page model financial aid disclosure, created by CFPB and the Department of Education, would make the costs and risks of student loans clear and outline a student's estimated debt and monthly loan payments after graduation. It would also make it easier for students to compare aid packages offered by different institutions, the agency said in a press release Tuesday.

"Student loans are one of the best examples of how credit can make lives better and help people achieve the American dream," said Raj Date, the special advisor to the Treasury secretary for the CFPB. "But in these tough economic times, the stakes have never been higher for students and their families to clearly understand the costs and risks of student loans. Having a simple, one-page financial aid shopping sheet would help students compare offers and choose the one that's right for them."

The form includes the cost of attending the college, including tuition, fees and other expenses; clear distinctions between scholarships and loans; a list of all the federal loans available to students; the total estimated student loan debt at graduation; and estimated monthly debt payments after graduation.

In a conference call with reporters Tuesday, Americans for Financial Reform and the Institute for College Access and Success called for greater transparency in student lending, and said students are often offered private loans without exhausting the federal loans that may be available to them.

Pauline Abernathy, the vice president of the Institute for College Access and Success, said it is easier to find information about how to build a fireplace than it is about student loans.

"One of the most important things is for the CFPB to be the place for borrowers to turn for information," Abernathy said.

Although the agency will be able to address some student lending issues — including compliance with the Truth In Lending Act and Fair Debt Collection Act — it won't be able to address some servicing issues or regulate nonbank lenders until it has a permanent director, Abernathy said.

Under Dodd-Frank, the CFPB does have the authority to write rules under existing federal consumer financial laws impacting student loans, and establish a private education loan ombudsman.

The CFPB also released this week a student debt repayment assistance tool that provides information on income-based repayment, deferments and alternative payment programs for borrowers who may be struggling to repay their student loans.

The model disclosure forms will be posted online in the coming weeks to allow the public to rank items in terms of usefulness, which will be used to update the form, the CFPB said. The Education Department plans to eventually publish a form that schools can use to give to financial aid information to students.